GTP report 2012 English

8/20/2019 GTP report 2012 English

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Federal Democratic Republic of E thiopia


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T AB L E OF CON T E N T S

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Executive Summary """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" #

Introduction """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" $

CHAPTER I MACRO ECONOMIC PERFORMANCE """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" %

1.1 Economic Growth """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" %

1.1.1 Supply Side Gross Domestic Product (GDP) """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" % 1.1.2 Demand side of GDP growth """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" &

1.2 Price """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" '

1.3 Welfare and Poverty """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" (

1.4 Fiscal Policy and Public Finance Performance """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" )

1.4.1 Total Government Revenue """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" )

1.4.2 Public Expenditure """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" $$

1.4.3 Financing""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" $%

1.5 External Finance Mobilization and Debt Management """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" $%

1.6 Monetary Policy, Financial Sector and External Sector Performance """""""""""""""""""""""""""""""""""""""""""""""""""""""" $'

1.6.1 Monetary Policy """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" $'

1.6.2 Financial Sector """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" $(

1.6.3 External Sector Performance """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" $*

1.7 Private Sector Development """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" %$

1 8 Summary of macroeconomic and main sectoral level performances %+


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3.2 Railway Development """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" &)

3.3 Energy Development """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" &)

3.3.1 Electric Power Generation """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" &) 3.3.2 Electric Power Transmission and Distribution """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" &*

3.3.3 Power Distribution Line Construction """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" &,

3.3.4 Transformation of Ethiopian Electric Power Corporation """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" &,

3.3.5 Bio-Fuel Development """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" '-

3.3.6 Alternative Energy Technology Promotion """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" '-

3.3.7 Electricity Power Operation Regulation """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" '-

3.3.8 Petroleum Downstream Operation Regulation """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" '-

+.& /010234456#278#36 90:013;4068 """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" '$

3.5 Potable Water Supply and Irrigation Development """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" '%

3.5.1 Potable Water Supply """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" '%

3.5.2 Irrigation and Drainage Development """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" '&

3.5.3 Ground and Surface water study and Integrated Basin Development"""""""""""""""""""""""""""""""""""""""""""""""""" '&

+.( 76?;3>8 90:013;4068 """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ''

+.) @07 />76?;3>8 76= A3B#?8#2? @0>:#20? 90:013;4068 """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" '(

+.* C:#78#36 @0283> DC#> />76?;3>8E 90:013;4068 """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ',

3.9 Construction and Urban Development """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" (-

3.9.1 Integrated Housing Development Program """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" (-

3.9.2 Urban Infrastructure Development Program """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ($

3.9.3 Construction Industry Development """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ($

CHAPTER IV SOCIAL SECTOR DEVELOPMENT """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" (+

4 1 Education and training (+


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5.4. 6 Media Broadcast and communication """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" *)

CHAPTER VI CROSS CUTTING SECTORS """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" *, 6.1 Women, Children and Youth Affairs """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" *,

6.2 Sport Sector """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,-

6.3 Prevention and control of HIV/AIDS """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,$

6.4 Social Affairs """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,$

(.' A7F3> CGG7#>? """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,%

6.6 Population and Development """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,&

6.7 Culture and Tourism """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,'

6.8 Science and technology development """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,'

6.9 Environment and Climate Change """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,)

CHAPTER VII MONITORIING AND EVALUATION SYSTEM """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,,

7.1 Monitoring the Overall Plan Performance by MoFED """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,,

7.2 Performances of the Federal Executive Bodies """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,,

7.3 National Survey and Census studies """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" ,,

CHAPTER VIII SUMMARY AND CONCLUSION """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" $-%

Annexes """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" $-'

Appendix 1. Regional Dirking Water Access Coverage in percent """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" $-(


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Table 15. Private investment projects started operation in 2010/11 and in 2011/12 ...................................... 22

Table 16. Area coverage and production of major food crops in 2011/12 fiscal year .................................... 25

Table 17. Productivity of selected crops in 2011/12 fiscal year ..................................................................... 27

Table 18. Performance of manufacturing export earnings (in million USD).................................................. 33

Table 19. Physical Accomplishment ............................................................................................................... 43

Table 20. Comparison of two years Accomplishment Against the five year plan .......................................... 44

Table 21.Targets and Accomplishment for road network in 2011/12............................................................. 45

Table 22. Employment created in road projects in 2011/12 ........................................................................... 46

Table 23. Energy Sector Performance (2011/12) ............................................................................................ 49

Table 24.Performance of Ethio-Telecom in 2011/12 ...................................................................................... 51

Table 25. The 2011/12 fiscal year potable water supply plan and performance (in %) .................................. 53

Table 26. Performance of medium and large scale irrigation plan in 2011/12 (in hectares) .......................... 54

Table 27. Performance of Road Transport in 2011/12 Fiscal Year ................................................................ 56

Table 28. Performance of Marine transport operations in 2011/12 Fiscal Year ............................................. 56

Table 29. Performance of multi-modal operation in 2011/12 Fiscal Year...................................................... 57

Table 30..Performance of logistics service in 2011/12 Fiscal Year ................................................................ 58

Table 31.Performance of dry port/ terminal in 2011/12 Fiscal Year .............................................................. 58

Table 32.Performance of Civil Aviation in 2010/11 ....................................................................................... 59

T bl 33 P f f P i Ed ti E l t 65


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Executive Summary

1.

The annual progress report on the second year of GTP implementation has been prepared focusing on

economic growth, social development and good governance. The report presents the major achievements

and challenges of the GTP during the fiscal year 2011/12 in economic growth, social development and

good governance in details. Moreover, the report analyzes the consolidated progresses made in the last

two years in light of the GTP targets set for 2014/15, and thereby aims to provide insight into the

possibilities and challenges in terms of achieving the GTP goals.

2.

During 2011/12, Ethiopi

percent. Agriculture, Industry and Services grew by 4.9 percent, 13.6 percent and 11.1 percent

respectively. The rate of GDP growth registered in 2011/12 was slightly lower than the target set for the

fiscal year under review because of the short fall in the performance of agriculture and industry. The

growth registered in the fiscal year is, however, very high compared to the 5.3 percent of Sub Saharan

Africa average growth rate for the same period and the average GDP growth rate of 7 % required to

achieve the MDGs target of reducing poverty by half by 2014/15. It is noted also that this remarkable

growth performance has been achieved amidst global economic challenges.

3. In the first two years of GTP implementation, the GDP has grown on average by about 10 percent per

annum. This achievement is slightly lower than the 11.1 percent annual average growth rate target set

for the first two years of the GTP period and the 11.2 percent annual average growth rate target set for

the entire GTP period. This marginal difference can, however, be compensated in the remaining three

years of GTP period through accelerated growths of the agricultural and industrial sectors.


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more transparent, efficient and competitive. To stabilize the domestic market and protect the low income

group of the community from the inflationary pressure, the Government has imported and distributed

wheat, edible oil and sugar. Though the rate of inflation is declining as a result of the policy and

regulatory measures taken, it still remains a potential challenge. Thus, the medium and long-term

strategies to reduce the inflationary pressure in a sustainable manner refer to accelerating agricultural

productivity and industrial growth. In addition, the resultant economic growth ought to generate wide

range of job opportunities. To reduce the effects of imported inflation, it is necessary to enhance import

substitution capacity in selected activities and increasing reserves capacities on selected critical

commodities. Finally, the undergoing regulatory measures need to be strengthened to make the domestic

market more transparent and competitive.

7. The efficiency and effectiveness of tax administration has improved over the first two years of the GTP

period owing to strengthening of the tax information system, education and awareness creation of tax

payers, better enforcement of tax laws and strengthening of the capacity of the tax administration

institution. Consequently, tax revenue, particularly in the first two years of GTP implementation, has

shown significant increase. In 2010/11 and 2011/12, a total of 59 billion and 85.7 billion birr of tax

revenue has been collected respectively. This indicates that tax revenue has increased by 36.2 percentand 44.7 percent in 2010/11 and 2011/12 respectively compared to the tax revenue collected in the

preceding years. The 2011/12 tax revenue is in fact double the amount collected in 2009/10, which was

only 43.3 billion birr. The tax to GDP ratio for 2010/11 and 2011/12 are 11.7 and 11.6 per cent

respectively. These are slightly higher than the tax to GDP ratio of the year 2009/10, which was 11.3

percent. The average share of tax revenue collected in the past two years comprises of 84 per cent of the

total domestic revenue. Though the tax revenue has increased over the last two years, it still remains low

d t th t ti it f th th fi i i t f th


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increased by 15 percent in 2011/12 compared to the performance in 2010/11. In 2011/12 a total of USD

3.2 billion revenue has been obtained from export of goods, while USD 2.8 billion was earned in

2010/11. Compared to its annual target of USD 3.7 billion, the export earning in 2011/12 was lower byUSD 0.55 billion or 15 per cent. It is to be recalled that merchandise export earnings increased by about

37 percent in 2010/11 compared to its preceding year. Thus the growth rate of merchandise export

earnings has slowed down in 2011/12. The decline in the world market prices of selected export

commodities is one of the reasons that accounted for the observed low export earnings in 2011/12.

Nevertheless, the key constraint for the low export performance is capacity limitation to produce export

goods at required quantity, quality and competitive prices. Thus to enhance the foreign exchange

revenue generation, it is critical to improve the domestic productive capacity in general, and increaseagricultural productivity and industrial investments in particular. In addition, improving the

effectiveness of the implementation of the various export promotion policies is essential to accelerate

export trade.

10. In 2011/12, a total of 232.44 million quintals of major food crops (Cereals, pulses and oil seeds) have

been produced by small farmers and commercial farms. Compared with the 2010/11 production of

221.82 million quintals, the 2011/12 production has surpassed by 10.62 million quintals. In the reporting period, the average productivity of major food crops was 17 quintal per hectare, which is higher by 0.50

quintal per hectare than the average productivity in 2010/11. Though marginal improvements in the

productivity of major food crops were registered in the fiscal year under review, this need to be

significantly improved in order to accelerate the economic growth, reduce poverty, contain inflationary

pressure and increase foreign exchange earnings. Therefore, the scaling up of the implementation of the

best agricultural technologies and farming techniques has to be consolidated over the remaining GTP

i d i d t h th i lt l d ti it f llh ld f


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the industrial sector generated a total of USD 255.4 million revenues in foreign exchange against the

target of USD 644.2 million set in the GTP for the fiscal year. In 2011/12, import substituting industries

have been promoted with encouraging results particularly in cement production. In the fiscal year, theannual capacity of producing cement reached 10.62 million ton at national level. In general, the

performances of the industrial sector in general and the manufacturing industry in particular were not as

per the targets set in the GTP. Therefore, the critical constraints in the development of the private

industrial sector need to be clearly spelt out in order to subsequently undertake measures that promote

the development of the industrial sector in general and the manufacturing industry in particular. In this

regard, the measures being undertaken to improve service delivery and facilitation, logistics and

transport, as well as industrial land delivery would be consolidated further over the coming GTP years inorder to promote investment and productivity improvements in the manufacturing industry.

13. A total of 7,397 km (4,350 in 2010/11 and 3,047 km in 2011/12) federal and regional roads are

constructed in the first two years of the GTP period. This is 47 per cent of the overall GTP target set for

2010/11-2014/15. As a result, federal and regional road network increased from 48,793 km in 2009/10

to 53,143 km in 2010/11 and further to 56,190 km in 2011/12. In addition to this, Woreda all-weather

road network has increased from 845 km in 2010/11 to 10,219 km in 2011/12 under the Universal RuralRoad Access Program (URRAP). This shows that the total Woreda all weather road length constructed

in the past two years is only 14.3 per cent compared to the target set in the GTP. Consequently, the

average time required to reach to an all weather road decreased from 3.5 hours in 2010/11 to 2.9 hours in

2011/12. In order to achieve the target of 1.4 hours average time required to reach to an all weather road

by 2014/15, the implementation of URRAP need to be strengthened.

14. Because of the lengthy time taken during the pre-construction preparatory works, construction of the


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delivery of better quality service and reduce problems that are repeatedly encountered on network

connections.

17. In general, the progress in terms of executing the major infrastructure programs has been remarkable

over the last two years. However the implementation of the infrastructure development programs have

also faced a number of challenges such as financial constraints, lack of adequate knowledge and skill of

project management, and lack of institutional capacity to deliver a more competitive and better quality

services from the infrastructure investments. To address these problems, short and medium term

strategies are devised and implemented. Enhancing domestic savings and expanding export earnings are

essential strategies to mobilize sustainable development finance for the infrastructure programs, while inthe meantime setting out a more clear and efficient prioritization of projects. The domestic capacity in

project planning and management needs to be strengthened also to accelerate the delivery of the

infrastructure projects. Finally, strengthening the capacity of domestic construction and manufacturing

firms and radically transforming the institutional capacity of the domestic infrastructure and utility

companies are also a central part of the strategies devised to address the challenges encountered. As part

of these capacity building strategies, competence certification of professions, consultants, contractors,

suppliers and manufacturers engaged in construction, water, energy and other infrastructure delivery programs is essential. Moreover, labor-based technologies have to be strictly pursued in the delivery of

rural road in URRAP and other infrastructure programs so far as they are the most appropriate

approaches.

18. The number of primary schools (grades 1-8) at national level increased from 26,951 in 2009/10 to 28,349

in 2010/11 and further to 29,507 in 2011/12. Accordingly, primary school gross enrolment and net

enrolment reached 95.4 percent and 85.4 percent respectively in 2011/12. The ratio of girls to boys in


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girls enrolment rate has also increased from 25.6 % in 2010 to 26.5 in 2011/12. In post graduate program

both in public and private institutions, the number of graduate students has increased from 13,881 in

2010/11 to 25,797 in 2011/12. In postgraduate 2010/11 to 20.1% in 2011/12. Quality and relevance are the main focus in higher education too, and

hence the quality and relevance improvement program of higher education has to be implemented more

effectively to ensure the expected quality and relevance in the remaining period of the GTP.

19. Organized community participation have been encouraged to effectively implement the health extension

program and thereby expand access and improve quality of basic health services in Ethiopia. The

number of health facilities has increased overtime. Accordingly, the number of health posts hasincreased from 14,192 in 2009/10 to 15,095 in 2010/11 and to 15,668 in 2011/12. The number of health

center has increased from 2,142 in 2009/10 to 2,660 in 2010/11 and further to 2,999 in 2011/12. As a

result, primary health care service coverage reached 93 percent in 2011/12. The number of health

extension service worker in 2011/12 has reached about 40 thousand. Antenatal and postnatal service

coverage, family planning services and the number of births attended by skilled health personnel have

also improved. As a result, maternal health and child health are expected to improve. However,

concerted efforts must be exerted to meet the MDG target of reducing maternal mortality by 2015. The progress made in improving child health is substantial indicating that the relevant MDG target will be

met in this regard. The prevailing challenges in the health sector concern high maternal mortality rate,

shortage of general practitioners and specialized doctors, and quality problems in health service delivery.

The primary focus will therefore be on addressing these challenges by strengthening the implementation

of the ongoing programs designed to address these problems over the coming GTP years.

20. With regard to capacity building, extensive leadership and technical training have been provided to top


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22. To ensure transparency and accountability and thereby eliminate corruption, a number of appropriate

measures have been undertaken with regard to establishing an efficient tax administration, and urban

land administration systems. In addition the ongoing reforms of improving transparency andaccountability in public financial management have been deepened during the period under review. In

2011/12, registration of assets of higher officials, and senior civil servants has been carried out.

Accordingly, the number of higher officials, and civil servants who have registered their assets has

increased from 18,000 in 2010/11 to 32,699 in 2011/12. The Ethics and Anticorruption Commission has

used different media to enhance awareness and understanding of the society on the problem of

corruption in the development process and there by promote ethical behavior among the society.

Moreover, the Commission has been monitoring corruption through investigation and prosecution of

corrupt practices. Accordingly about 7,072 criminal suspects were identified of which 3,057 were

subjected to investigation. The Commission then prosecuted 1,041 of them to the court. Furthermore,

public properties embezzled by corruption including 703,935 m2 of urban land, 16 buildings, 15

vehicles, Birr 103.14 million and about 5.6 million Birr worth of other properties were collected and

submitted to the concerned government institutions. Hence conviction rate reached 79.3 % in charge

registration and 76.65 % in verdict cases. In spite of these accomplishments, public service delivery,

public procurement, land administration and tax administration agendas remain the primary focus in the

fight against rent-seeking and corruption in the country.

23. To strengthen the democratization process, building the capacity of the legislative bodies is essential.

Accordingly in 2011/12, different management and professional training were provided to council

members and their experts at different levels of government administration to enhance their capacity to

legislate and oversee the executive. Large awareness creation were provided through different media to

citizens, government bodies and other institutions so as to enhance the knowledge on basic constitutions

provisions, as well as the concepts of human and democratic rights. The role of civil societies and


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Introduction

Poverty eradication is the core development objective of the Ethiopian Government while rapid economic

growth is a key strategy to this objective. This rapid economic growth has to be broad-based, equitable and

sustainable. The ongoing Growth and Transformation Plan (GTP) has been drafted based on the

achievements of the Plan for Accelerated and Sustained Development to End Poverty (PASDEP) and the

MDGs and the National Vision. The major objectives of the plan are (1) maintain at least an average real

GDP growth rate of 11.2 percent per annum and attain MDGs, (2) expand and ensure the qualities of

education and health services and achieve MDGs in the social sector, (3) establish suitable conditions for

sustainable nation building through the creation of a stable democratic and developmental state; and (4)ensure the sustainability of growth by realizing all the above objectives within a stable macroeconomic

framework.

It is two years now since GTP started to be implemented in all areas of the country. The Annual Progress

Report (APR) on the first year (2010/11) GTP implementation was drafted and then approved by the

Government. Subsequently consultations were made on the APR with various actors and stakeholders at

regional and federal levels. The feedbacks obtained from the consultations were taken into account in producing the final draft of the APR. Now the draft APR on the second year (2011/12) implementation of

the GTP is ready for comments and subsequent Government approval. The objective of this annual progress

report is to provide information on achievements of planned targets, challenges encountered, measures taken

and lessons drawn from the implementation of the GTP in 2011/12.

Survey data were used from the Central Statistics Agency (CSA), while administrative data were collected

f t l t i tit ti i th ti f th 2011/12 APR Th f d t ll ti


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CHAPTER I

MACRO ECONOMIC PERFORMANCE

1.1 Economic Growth

1.1.1 Supply Side G ross Domestic Product (G DP)

Agriculture, Industry and Services grew by 4.9 percent, 13.6 percent and 11.1 percent respectively. The rate

of GDP growth registered in 2011/12 was slightly lower than the target set for the fiscal year under review

because of the short fall in the performance of agriculture and industry. The growth registered in the fiscal

year is, however, very high compared to the 5.3 percent of Sub Saharan Africa average growth rate for the

same period and the average GDP growth rate of 7 % required to achieve MDGs target of reducing poverty

by half by 2014/15. In addition, this remarkable growth performance has been achieved amidst global

economic challenges. Overall, the current Ethiopian economic growth is still ranked among the top

performers of the non-oil economies in the world.

rew by 11.4 percent during the first year of the GTP period. In

the first two years of GTP implementation, therefore, the GDP has grown on average by about 10 percent

per annum. This achievement is slightly lower than the 11.1 percent annual average growth rate target set for

the first two years of the GTP period and the 11.2 percent annual average growth rate target set for the entire

GTP period. This marginal difference can, however, be compensated in the remaining three years of GTP


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the best agricultural technologies and farming techniques of the best farmers via the extension system and

training of farmers have been instrumental in the growth of the agricultural sector. Yet the performance of

the agricultural sector in 2011/12 has fallen short of the target. The slowdown of the growth rate of theagricultural sector in 2011/12 has in turn adversely affected the growth rate of the overall economy given

that the sector accounts for about of 44 percent of the GDP. The corollary is that in order to further

accelerate the growth rate of the GDP over the coming years, it is essential to increase agricultural

productivity through the scaling up strategy of the adoption of the best agricultural technologies and

practices adopted by the best farmers.

Similarly, in the two GTP implementation years, the industrial sector has gone through promising

achievements by registering average growth rate of 14.3 percent. Although, the growth achievements of the

industry sector during the two GTP years were above the PASDEP five years average. it is still lower than

the 16 percent average growth rate target set for the two years under review. In particular, the growth rate of

the micro and small scale enterprises sub-sector has been lower than the target set for 2011/12. Thus to

register double digit economic growth rates over the next three years of the GTP period it is essential to

promote private investment in the large and medium scale, as well as small and micro enterprises of the

manufacturing industry. With regard to service sector, the performance recorded in hotels and tourism,

whole sale and retail trade, housing and real estate, banking and insurance, education and health services has

led to two years average sectoral growth rate of 11.8 percent, which is above the GTP five year average

target of 10.6 percent.

Table 1. Growth Rate of Real GDP in 2011/12 (in percent)

2011/12 2010/11 2010/11


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Table 2. Share of GDP by Major Industrial Classification (in Percent)

Sector 2010 / 11 2011 / 12 2010 / 11 and 2011 / 12Average Performance

2010 / 11-2014 / 15Average PlanPlanned Actual

GDP @ C MP 100 100 100 100 100Agriculture & allied activities 45.6 39.7 44.0 44.75 38.8

Industry 10.6 14.0 11.1 10.85 15.6

Services 44.5 46.3 45.6 45.0 45.6

Source: MoFED

Economic growth registered in the last two years has enabled the country to maintain an average annualeconomic growth rate of 11 percent over the last nine consecutive years between 2004 and 2012. The

economic growth has moved to an advanced growth trajectory starting from the year 2003/04; since then, the

economy has grown consistently for nine years with an average growth rate of 11percent per annum. In these

performance has been among the highest in the region during the same period.

The source of this overall economic growth between 2004 and 20012 is mainly attributed to the growth in

the agriculture and service sectors. As these sectors take the lion share of the economy, improvements in the

growth o

2011/12, the service and agriculture sector have grown on average by 13.2 percent and 7.7 percent per

annum, respectively. Even though, the growth in agriculture se

still dominated by small holder farming with low productivity. The growth in the service sector mainly

emanated from the expansion of hotels and restaurants, real estate and housing, transport and


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by the end of the planning period. The investment rate has also increased from 27.9 percent in 2010/11 to

34.6 percent in 2011/12. Again the improvement in the investment rate is the result of the increase in

domestic savings, and the measures taken to promote private investment in the country. It is planned tomaintain this high level of investment rate in the remaining years of the GTP.

Table 3. Demand Side GDP Distribution (in percent)

Sector2010 / 11 2011 / 12

Performance Plan Performance

Total Final Consumption 87.2 89.6 83.5

Government Final Consumption 8.6 8.0 7.0Private Final consumption 78.56 81.6 76.51

Gross Capital Formation 27.9 27.2 34.6

Total Export including Non-factor services 17.0 17.7 14.0

Total Import Including Non-Factor Services 32.1 34.5 32.1

Resource Balance (15.1) (16.8) (18.1)

Gross Domestic Savings 12.8 10.4 16.5

Source: MoFED

1.2 Pr ice

During the GTP period, the general consumer price index was projected to grow at a single digit rate.

However, in the past two GTP periods the price growth has been in double digits. In 2010/11, the average

annual price growth rate has been 18 percent; the rate has increased to 34.3 percent in 2011/12 (Table 3).

The growth of consumer prices in the domestic market is mainly attributed to the price hike in international

d k Th i f i i h d i k i d h l i fl i i


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the GTP target of a single digit inflation rate. Therefore, during the two GTP periods inflation has been a

critical challenge. The government plans to continue with the tight fiscal and monetary measures to ensure

stability of prices. Furthermore, the enforcement of the business registration and licensing code will beconsolidated to promote a more transparent and competitive domestic market. As a short term remedy, the

supply of basic food items for the urban market will be continued. However, the sustainable solution to the

problem rests with sustaining the broad based economic growth accompanied by job creation. In particular,

increasing the productivity of agriculture and expanding manufacturing investment is crucial in this regard.

1.3 Welfare and Poverty

The major objective of the Growth and Transformation Plan is to register broad-based, accelerated and

sustainable economic growth and thereby reduce poverty. So, the government has formulated and

implemented pro-poor policies and strategies that lead to accelerated and broad-based economic growth and

thereby also to poverty reductions and improved welfare of citizens. The integrated development programs

and the micro and small scale enterprise development program have been used as a tool to fight the

unemployment challenge in cities and urban centers. Particularly, the youth and women are the primary

targets to benefit from these programs. Similarly, in order to address the rural poverty, the agriculturalextension program, and natural resource conservation and development program have been implemented.

Furthermore, the poverty eradication drive has also been complemented by public investments in growth

enhancing pro-poor sectors. The economic growth outcomes of the past several years including that of

2010/11 and 2011/12 on poverty and welfare have been evaluated below using the income and non-income

poverty dimensions.

As a result of the economic growth, the per capita income has increased from USD 377 in 2009/10 to USD

387 i 2010/11 d f h USD 513 i 2011/12 A di h H h ld I d C i


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Likewise, the rapid economic growth has been associated with job creation, which in turn led to a decline in

urban unemployment. The rate of urban unemployment was 20.4 percent in 2009. It declined to 18.9 percent

in 2010. Recent survey results indicate that the rate of urban unemployment has declined to 18 percent in2011 and further to 17.5 in 2012. Generally, the progress so far in terms of poverty reduction in spite of the

economic

growth in the fight against poverty and unemployment. In addition, it implies the significance of sustaining

the rapid economic growth in order to achieve the MDGs target of halving poverty by 2015.

With regard to improving non income poverty, massive investments have been undertaken in the social

sector. Investment in the construction of new health facilities and upgrading of existing ones, strengthening

the implementation of the health extension program, and expansion of health human resource development

have led to significant improvements in the welfare of people. The primary health care coverage has now

increased to 93 percent, while significant progress has been made in improving maternal and child health. In

particular, the marked progress in terms of reducing child mortality has set Ethiopia in a better position to

achieve the MDGs target in this regard. Likewise, massive investment has been undertaken in the expansion

of primary, secondary and tertiary education. As a result, enrollment has increased at all levels of the

education system.

The gross enrollment rate in primary education has now reached 95.4 percent, indicating that there are now

about 17 million children enrolled in primary schools all over the country. In addition, massive investments

have been made in road rehabilitation and construction, potable water supply, telecom services, and electric

supply. These have a direct bearing on reducing poverty and improving the welfare of citizens. In a nutshell,

the rapid economic growth has been pro-poor as can be observed from the reduction in poverty and

unemployment, as well as improvements in the welfare of citizens. However, the level of poverty is still very

high. Thus it remains critical to sustain the rapid economic growth and social development over the coming


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Table 6. Government Revenue and Expenditure (in million Birr)

Type of Revenue 2009/10

Performance

2010/11

Performance

2011/12 Performance (%) against

2014/15

Plan

2011/12

performance

against 2014/15

plan (%)

Planned Actual 2011/12

Plan

2009/10

Performance

2010/11

Performance

Total revenue

including grants

66237

85611

96941 115659 19.3 74.6 35.1 173040 49.6

Domestic Revenue 53861 69120 74585 102864 37.9 91.0 48.8 145299 41.3

Tax revenue 43318 58981 63588 85740 34.8 97.9 45.4 127212 48.4

Direct Tax 14906 19550 - 28858 - 93.6 47.6 - -

Indirect Tax 28412 39431 - 56882 - 100.2 44.3 - -

Domestic Indirect Tax 10727 15705 - 23326 - 117.5 48.5 - -Import Tax 17685 23726 - 33556 - 89.7 41.4 - -

Non tax Revenue 10546 10139 10997 17124 55.7 62.4 68.9 18087 5.6

Grants 12376 16491 22352 12795 -42.8 3.4 -22.4 27741 116.8

Total expenditure 71334 93831 106125 124417 17.2 74.4 32.6 201146 61.7

Recurrent expenditure 32012 40535 45224 51445 13.8 60.7 26.9 78924 53.4

Capital expenditure 39322 53297 60901 72971 19.8 85.6 36.9 122222 67.5

Pro-poor expenditure 47251 62378 72165 87568 21.3 85.3 40.4 146837 67.7

Budget deficit (5097) (8220) (9184) (8758) -4.6 71.8 6.5 (28106) 220.9

including grants

Expenditure financing 5097 8220 9184 8758 -4.6 71.8 6.5 28106 220.9

External (net) 4131 7798 4201 6530 55.4 58.1 -16.3 5220 -20.1

Domestic (net) 1758 111 4983 3793 -23.9 115.8 3317.1 22886 503.4

Revenue from - 1458 - 2763.9 - - 89.6 - -

privatization

Source: MoFED.

a) Domestic R evenue


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indicate that the government is increasingly relying on the more reliable tax revenue as a source of its

income.

Figure 2. Sources of Total Government Revenue including Grants in Percent (2011/12)

)&P

$'P

$$P

/7H I36 /7H M>768?

Source: MoFED

Over the last two years of the GTP period the government has been further intensifying the implementation

of the tax reform. The reform comprises of four strategies: Strengthening Modern Tax Information System,

h i


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information within and without the tax authority for fast service delivery, controlling tax evasion, creating a

dependable database, and for efficient and effective tax collection.

Tax Identification Number (TIN):

expected to have Tax Identification Number (TIN). An automated TIN system has been developed, deployed

and supported by biometric finger print system at a national level. And at this reporting period a total of

589,802 finger print information has been collected. From the beginning of the project till the end of July

2011/12, a total of 1.9 million finger print has been collected, which is 122% of the planned 1.6 million

finger print information. Subsequently, a total of 1.3 million (67.30%) finger print biometric identification

card has so far been printed. About 1.2 million (94 percent) of the total finger print biometric identificationcards printed so far are distributed by Addis Ababa and Regional Revenue Authorities.

Cash register system: In 2011/12, 26,715 additional tax payers have introduce and used cash register

machines in their business operations. This rises the total number of tax payers suing cash registers to 45,367

who have now installed a total of 50,607 cash register machines. To improve the effectiveness of the

introduction of the cash register system, trainings and supports have been provided to various stakeholders.

Standard Integrated Government Tax Administration System (SIGTAS): SIGTAS had been

implemented fully at the federal level. Integrating SIGTAS with Biometric configuration (separation of TIN

duplication, automation finger print identification system (AFIS) with SIGTAS, Card Production Facility

(CPF) and supportive hard ware and applications) has been done. In addition the authority is deploying

SIGTAS in the regions.

Automated System to Customs Data Administration (ASYCUDA++): the Customs information


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Audit works: During the fiscal year duty and tax audit activities have been done. The audit system has also

been aligned with tax administration automations (SIGTAS and ACYCUDA++) to have reliable and swift

information flow for decision making.

Intelligence works and prosecution: Different intelligence works has been done in collaborating with

different partners. Most customs branches of the authority are exercising risk averting management system.

During the fiscal year the proportion of court cases decided in favor of the Authority to the total court cases

was 90.3 % (conviction rate).

Capac

ity building of the

tax authority: Extensive recruitment of young graduates has been undertakenover the last two years in order to strengthen the human capacity of the customs and revenue authority.Again extensive trainings on skills, attitudinal changes and government policies and strategies have beenorganized to these young graduates and to other staff of the authority.

b) Grants

Another component of the general government revenue concerns grants. In 2011/12, total grants have

declined to birr 12.8 billion from birr 16.5 billion in 2010/11, showing a reduction of 22.4 percent. The totalgrants of 2011/12 also fall short of the expected target of grants for the same fiscal year by 57.2 percent. .

The decline is mainly attributed to the decline in disbursements from PBS. Only 45 percent of the total PBS

fund expected for the fiscal year has been disbursed. This indicates the growing challenge associated with

aid predictability in Ethiopia.

1.4.2 Public Expenditure


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During 2011/12, total government expenditure has increased to birr 124.4 billion from 93.8 billion in

2010/11. Out of the total government expenditure, birr 51.4 billion or 41 percent is spent on recurrent

expenses, while the remaining 73 billion or 59 percent of the total expenditure is spent on capitalexpenditures. This spending pattern is consistent with the stated fiscal policy of the government. During the

fiscal year, recurrent and capital expenditure have increased by 26.4 percent and 36.7 percent, respectively,

indicating that even though the economy operated under tight fiscal policy, the capacity and commitment of

the government to invest on national development programs has been sustained remarkably.

Table 8. Pro poor Government spending (million Birr)

2010 / 11Actual

2011 / 12 Fiscal Year Performance (%) against2014 / 15

Plan2009 / 10Actual

Plan ActualAs percent of total

expenditure 2011 / 12

plan2010 / 11

performance Total Government Expenditure 71334 93,831 106,125 124,124 100 17.0 32.3 201,146

Capital expenditure 39322 53,297 60,901 72,872 58.7 19.7 36.7 122,222

Current expenditure 32012 40,535 45,224 51,252 41.3 13.3 26.4 78,924

Education 16870 23,345 24,562 29,710 23.9 21.0 27.3 44,025

Health 4547 6,307 7,027 7,626 6.1 8.5 20.913,894

Agriculture 6998 8,246 13,123 11,042 8.9 -15.9 33.9 25,699

Water 4235 5,563 5,701 10,147 8.2 78.0 82.4 17,321

Roads 14601 18,918 21,752 28,836 23.2 32.6 52.4 45,898

Poverty-targeted expenditure 47251 62,378 72165 87,568 70.4 21.1 40.0 146837

Source: MoFED

Of the total spending, 70.4 percent or 87.6 billion was spent on growth-oriented pro poor sectors. The

spending on growth oriented pro-poor sectors has increased by 40 percent or 25 billion Birr compared to that

of 2010/11. The federal government has allocated additional fund to the tune of 15 Billion Birr to all regions


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debt relief. According to the World Bank latest report of net per capita ODA receivables, Ethiopia ranks the

last among countries of the sub-Sahara Africa1.

External Resource Commitment: In 2011/12 a total of 3175.81 million USD was committed by both

bilateral and multilateral donors for Ethiopia from all sources. In 2011/12, Ethiopia secured 1,737.7 million

USD commitments from 15 bilateral donors, out of which close to 1,592 million USD (92 %) was in the

form of grants. During the same period, 1326.5 million USD was committed by International Financial

Institutions (IFIs), of which, 1216.1 million USD or 92 percent was committed in the form of concessional

loans with the balance obtained as a grant. Of the total commitment by this group, 73.8 % was sourced from

the World Bank, 17.4 % from the African Development Fund, 8.8 % from other International FinancialInstitutions. During 2011/12, United Nations Organizations committed, over 9.8 million USD in cash and in

kind, for activities to be implemented on six development projects and one Humanitarian program.

Regarding commitment from the European Union, in fiscal year 2011/12, a total of 101.81 million USD was

committed for various projects and programs.

Table 9. External Resource Commitment, in million USD

Source 2010 / 11 2011 / 12 Fiscal Year 2011 / 12 Performance (%) againstPlan Actual

2011/12 plan 2010/11 performance

Bilateral 2601.6 2802 1737.7 62.02 66.79

162.1 427.5 448.2 104.9 276.5

International Financial Institutions 955.4 1259.5 1326.5 105.3 138.84

UN organizations 2014.9 - 9.8 - 0.49

EU 95 258 101.81 39.46 107.17

Total 5666.9 4319.5 3175.81 73.72 56.04


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Table 10. External resource disbursement, in million USD

Source 2010 / 11 2011 / 12 P

e

rformance

(%) agains

tPlan Actual 2011 / 12 plan 2010 / 11 performance Bilateral 915 1012 1141.3 112.7 124.7

332.3 - 346.5 - 104.2

International Financial Institutions 1063 1013 964.0 95.2 90.7

UN organizations 567.6 - 407.5 - 71.8

EU 156.6 227.8 105.1 46.13 67.1

Total 2702.2 - 2617.9 - 96.88

Source: MoFED

In 2011/12 the United Nations Organizations disbursed over 407 Million USD. From this, 183.8 Million

USD has been disbursed in kind and the remaining 223.7 Million USD is made in Cash. The disbursement

made by the UN agencies during 2011/12 declined by 28.2 % compared to the previous year, mainly due to

the change in financial management system introduced by some UN organizations which took longer period

to institutionalize. This directly affected the fund released by the system to the implementing partners. The

other reason is that the fund released by Global Fund during this budget year is not as much as the previous

year. With regard to disbursements from the EU, in 2011/12, out of the targeted disbursement of 227.8million USD, only 105.1 million USD (46.1

disbursement has shown a decline compared to the 2010/11 performance.

In addition to the size of commitments and disbursements, the Ethiopian government also focuses on the

quality of aid as reflected in the Paris Aid Effectiveness Agenda. The principles followed in this regard

include: increasing the volume and effectiveness of aid based on development results; aligning all support to


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Table 11. Loan disbursement in million USD

2010/11 2011/12 Fiscal Year Performance (%) againstPlan Actual 2011/12

plan

2010/11

performance

Central Government Debt Repayment 830.3 370.3 981.6 259.1 125

Guarantee loans 372.4 - 322 - 94.5

Non- 886.7 - 322 - 38

Total debt repayment 2089.5 - 1625.7 - 82.3

Source: MoFED

External Debt service : The government has paid off 100 million USD against the plan of paying 115.9

million USD to service foreign debt. Out of the service, 53.4 percent was effected to settle principal

payment, while the remaining 46.4 percent has been effected for interest payment. In addition to the public

sector debt service, government guaranteed and non-guaranteed loans were serviced during the fiscal year

under review, amounting to 42.2 million and 253.95 million USD, respectively.

HIPC initiatives: Since its start Ethiopia is benefiting from the HIPC initiative. During the fiscal year under

review, Ethiopia was expecting to receive debt relief of 8.8 million USD under the scheme. Ethiopia actually

received 8.5 million USD in debt relief during the fiscal year, which is slightly lower than the expected debt

relief. In 2011/12, the total Ethiopian debt stock (including central government loans, as well government

guaranteed and non-guaranteed loans of public enterprises) amounted to 21.5 percent of GDP. This figure is

by far smaller than the Sub Saharan average of 33 percent. According to the IMF 2012 SSA Economic

Outlook Report, Kenya, Tanzania, and Uganda have total debt stock of 47.2 percent, 46.8 percent and 36.2


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National Bank. During the year, USD 2,350 million has been sold in foreign exchanges to commercial banks

and the excess reserve of commercial banks has reached 1.2 percent of net deposits.

With regard to broad money supply growth, during the year broad money supply has registered a growth rate

of 30.3 percent against the target of 30.6 percent. The growth in broad money supply was largely associated

with expansion of domestic credit by 39.5 which offset the contraction of net foreign asset by 28.4. Looking

at the feature of domestic credit, net claims on government decreased by 24.8 percent and credit to non-

government sector expanded by 56.7 percent. These developments clearly reflect the ongoing policy

order to finance the budget deficit using monetary policy instruments, the government has continuedoffering T-bills for the fortnightly auction market. Accordingly, in 2011/12, birr 77.4 billion T-bills have

been sold against the target of birr 96.5 billion. The amount of T-bills sold in 2011/12 shows an increase of

42.8 percent compared to the preceding fiscal year. The achievement is mainly attributed to the introduction

of weekly T-Bills. Out of the total T-bills sold in the fiscal year, the share of non-banks and commercial

banks was 80.1 percent and 19.9 percent, respectively, implying that the share of commercial banks has

declined by 18.8 percentage points from the previous fiscal year. Ethio Telecom, Public and Private

Employees Social Security Agencies, Ethiopian Insurance Corporation and other public developmententerprises are some of the major non-bank sources that have participated in buying the financial

instruments.

Interest Rate Development: During 2011/12, the minimum interest rate on savings remained unchanged at

5.0 percent. On the other hand, the minimum and the maximum lending rate of commercial banks stood at

7.5 and 16.25 percent respectively. As a result, the average lending rate reached 11.88 percent.


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The amount of new loans disbursed (excluding bond purchases) was Birr 56.1 billion. Compared to the

2010/11 performance, this shows an increase of 32.8 percent. The new loan received in 2011/12 by domestic

policy direction, however, the amount of loan received by industry and agriculture sectors grew by 57.8

percent and by 75.5 percent in 2011/12 respectively. The fiscal year also witnessed an important

improvement in the banking sector in terms of capital accumulation and deposit mobilization. Accordingly,

the total bank capital reached Birr 18 billion; it has increased by 12.9 percent from the previous fiscal year.

Similarly, total deposits mobilized by commercial banks surged up by 49.3 percent, compared to 2010/11,

and reached Birr 187.3 billion. Of the total deposit, demand deposit constituted 49.3 percent while savings

and time deposits accounted for 44.1 and 7 percent, respectively.

During 2011/12 fiscal year, the total number of insurance companies reached 15. Similarly, the total number

of branches has increased by 10 percent and reached 243. Their capital has also increased by 25.6 percent

and reached Birr 1.2 billion. Similarly, Micro-Finance Institutions (MFIs) have recorded strong performance

during the fiscal year. Accordingly, their capital has risen to Birr 3.8 billion from Birr 2.95 billion in 2011

reflecting a 27.5 percent increase. The stock of total loans extended by MFIs also grew from Birr 7.0 billion

in 2010/11 to Birr 9.3 billion in 2011/12. Similarly, the amount of savings mobilized by these institutionsrose from Birr 3.8 billion in 2010/11 to Birr 5.5 billion in 2011/12. The expansion of micro finance services

provides notable contribution in reducing poverty and unemployment in the economy as the service targets

Modernization of the National Payment System

In order to create strong and modern payment system, the government has launched National Payment and


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over the remaining GTP periods. Thus by consolidating the measures taken so far, it is planned to increase

the domestic saving rate to about 20 percent by the end of the planning period.

On the other hand, the amount of total capital formation as percent of GDP has increased to 34.6 percent in

2011/12 from 27.9 percent in 2010/11. Clearly, the Ethiopian investment rate is much higher than the SSA

average of about 23 percent. The challenge concerns sustaining such a very high level of investment rate and

narrowing the saving-investment gap by increasing domestic savings. Addressing these challenges is largely

contingent upon the success of significantly and sustainably increasing domestic savings. Thus, the ongoing

policy and administrative measures such as curbing the inflation pressure, enhancing public financial

education, improving financial access and services, deepening financial institutions and other instrumentsthat help to improve domestic saving behavior have to be more effectively implemented and administered.

Furthermore, the ongoing public finance reforms have to be deepened in order to enhance the efficiency and

effectiveness of the allocation and use of public finances.

1.6.3 External Sector Performance

Merchandise Export

In 2010/11, merchandize export earning has been 2.8 million USD, showing an increase of 37 percent from

the level of USD 2 billion in 2009/10. Similarly, total merchandise export revenue in 2011/12 amounted to

USD 3.15 billion, showing a growth rate of about 15 percent compared to the preceding fiscal year.

However, the performance of 2011/12 falls short of meeting the target of 3.7 billion USD. The export

growth is attributed mainly to the export proceeds of oilseeds, gold, live animals, pulse, flower, meat & meat

products, and fruits and vegetables. The volume of oil seed export has increased to 3.67 million quintal from


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Table 12.Value of Exports by Major Commodities (Value in Millions USD, Volume in Millions k.g. and Unit price in USD/k.g.)

Commodities 2010/11 2011/12Growth (in percent)

Share from total export (%) 2014/15

Target2010/11 2011/12

Coffee 841.8 833.1 -1.0 30.64 26.42 1120

Volume 196.1 169.4 -13.6

Oil Seeds 326.6 472.3 44.6 11.89 14.98 500

Volume 254.2 367.4 44.6

Leather and Leather products 103.8 109.9 5.9 3.78 3.49 882

Volume 5.2 4.4 -14.2

Pulses 137.9 159.7 15.8 5.02 5.07 -

Volume 224.5 226.2 0.7

Meat & Meat Products 63.3 78.8 24.5 2.30 2.50 948

Volume 16.9 17.7 4.7

Fruits & Vegetables 31.5 44.9 42.7 1.15 1.42 535Volume 91.6 123.5 34.9

Flower 175.3 197.0 12.4 6.38 6.25 "

Volume 41.6 46.8 12.6

Gold 461.7 602.4 30.5 16.81 19.11 "

Volume 0.0112 0.0122 9.0

Live Animals 147.9 207.1 40.0 5.38 6.57 "

Volume 112.8 144.9 28.4

Chat 238.3 240.3 0.8 8.67 7.62 "

Volume 41.0 41.1 0.2 "

Bees Wax 1.8 2.2 20.9Volume 0.36 0.37 1.3 "

Others 217.3 205.0 -5.7

total : Value 2,747.1 3,152.7 14.8

Source : Ethiopian Revenues and Customs Authority

On the other hand, the export of coffee has generated 833million USD, which is 1 percent lower than the

previous year earning and 22.8 percent lower than the planed amount of 1.1 billion USD. This is due to the

decline in the volume of coffee export by 13.6 percent. However, owing to the improvement in international


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increased by 28.1 percent over the preceding year and amount USD 2.1 billion largely driven by the 16.6

percent rise in international fuel price. Fuel import bills consumed 67.4 percent of total export proceeds in

2011/12. During the same period import of transport, agricultural and industrial goods rose by 17.7, 87.9 and1.4 percent, respectively thereby capital goods import increased by 7.4 percent compared to the previous

year. However, the share of capital goods import bill as share of total imports bill declined to 26.9 percent

from 33.4 percent in 2010/11.

Balance of Payment

Despite a significant rise in total exports, the deficit in merchandise trade widened by 43.6 percent to USD7.9 billion in 2011/12 from USD 5.5 billion in 2010/11. This is largely attributed to the proportionate

increment in total import of goods resulting from a rise in domestic income. Consequently, export coverage

of import declined to 28.5 percent from 33.3 percent recorded in the previous year. In 2011/12, a net surplus

of USD 74.9 million was registered in the service account. However, the surplus was 89.1 percent less than

the surplus registered in the preceding year. This is the result of lower net receipts from travel, and

government services coupled with a surge in net payments for other services (121.7 percent) in general, and

a 63 percent rise in payments to construction services. Similarly, compared to the preceding year, net

inflows of private transfers in 2011/12 has increased by 18.2 percent to USD 3.2 billion largely because of a

huge growth in receipts of Non-Government Organizations (52.2 percent) and transfers to private individuals

(3.2 percent). Private remittance is estimated to amount about USD 1.34 billion in 2011/12, showing an

increase of about 26.4 percent compared to the transfers in the preceding fiscal year.

Table 13. Merchandise Import in million USD


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Table 14. Balance of Payment (in Million US Dollar)

Indicators 2010/11 performance

2011/12 performance

performance (%) against2010/11 achievement

Trade Balance -5,506.2 -7808.5 41.8

Merchandise Export 2,747.1 3152.7 14.8

Merchandise Import 8,253.3 11,061.2 34.0

Net Services 688.1 74.9 -89.1

Private Transfers 2,746.7 3,245.8 18.2

Current Account Balance(excl. public transfers) -2071.4 -4,587.8 121.5

Public Transfers 1,860.7 1,787.9 -3.9Current Account Balance(incl. public transfers) -210.6 -2,799.8

Capital Account 2,535.5 2,119.8 -16.4

Net Errors & Omissions -940.7 -292.7

Balance of Payment 1384.2 -972.8

Financing -1384.2 972.8

Reserves -1375.8 980.7

Debt relief -8.4 -8.0

Source: National bank of Ethiopia

1.7 Pr ivate Sector Development

The private sector is expected to play the pivotal role in realizing the objectives of the GTP. Thus private

investment particularly in manufacturing and commercial farming has been promoted and supported over the

last two years of the GTP period. The fundamentals for private sector development were further enhanced


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Table 15. Private investment projects started operation in 2010/11 and in 2011/12

Economy 2010/11 performance 2011/12 performance

Project innumber

Capital in BillionBirr

Project innumber

Capital in BillionBirr

Agriculture 10 1.11 20 1.84

Manufacturing 85 1.47 86 12.46

Services 114 1.27 118 3.07

Tota l 209 3.85 224 17.37

Source: Ethiopian Investment Agency

In order to further augment the participation of the private sector in the overall economy, high levelGovernment and Private Sector Dialogues have been conducted regularly. Such Government-Private sector

dialogue and partnership is a key to seek common solutions for problems that hinder private sector

development. Particularly, problems that are directly related with provision of government services will be

reduced by investing on the development of government institutions. In addition, the government would

redouble its efforts to address the problems in logistics and transport as well as in the delivery of industrial

land to further promote private investments in priority sectors. On the other hand, the private sector is

expected to exploit the conducive investment opportunities and aligning its investments with the government

priorities, and thereby play a greater role in accelerating growth and job creation.


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1.8 Summary of macroeconomic and main sectoral level performances

No. Indicators

2010 / 11Performance

2011 / 12 Target for2014 / 15Planned Actual

I Macro Economics and Public Finance Indicators

1.1 Macro Economy

Real GDP growth rate (%) 11.4 11.1 8.5 11.4

Per Capita GDP at Current Market Prices(USD) 387 - 513 523

Total Consumption Expenditure (PFCE) as % of GDP 87.2 89.6 83.5 80.0

Gross Domestic Capital Formation as % of #DP 27.9 27.2 34.6 34.6

Gross Domestic Saving as % of GDP 12.8 10.4 16.5 20.0

1.2 Public financeDomestic revenue and Grants as % of GDP 16.9 18.4 15.7 20.4

Domestic revenue as % of GDP 13.7 14.2 13.9 17.1

Tax revenue as % of GDP 11.7 12.1 11.6 15.0

Total poverty-oriented expenditure as % of GDP 12.3 13.7 11.9 17.3

Total expenditure as % of GDP 18.5 20.2 16.9 23.7

Capital Expenditure as % of GDP 10.5 11.6 10.0 14.4

Recurrent Expenditure as % of GDP 8.0 8.6 7.0 9.3

Overall Balance Including Grants as % of GDP (1.6) (1.7) (1.2) (3.3)

External debt (Net) as % of GDP 1.5 0.8 0.9 0.6

Domestic debt (Net) as % of GDP 0 0.9 0.5 2.7

1.3 External sector

Export of Goods and Non-Factor Services as % of GDP 17.0 17.7 14.0 22.5

Imports of Goods and Non-Factor Services as % of GDP 32.1 34.5 32.1 35.7

Resource Balance as % of GDP (15.1) (16.8) (18.1) (13.1)

II Poverty & Welfare

Total poverty Head Count (%) 29.6 26.1 27.6 22.2

Food Poverty Head Count (%) 33.5 25.0 32.7 21.2

III Economic Sectors


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1.8

No. Indicators

2010 / 11Performance

2011 / 12 Target for2014 / 15Planned Actual

4.2 Rail way

Rail way network in km 0 493 0 2395

4.3 Power

Electricity coverage in % 45.4 55.0 48.5 75.0

Energy generating capacity(MW) 2048.5 2582 2177 8000

Length of distribution line (km) 138832 145838 153230 258038

Rehabilitation of transmission line (km) 967 3258 1688 8130

4.4 TelecomFixed telephone density (per 100) 1.03 2.0 0.95 3.4

Mobile service subscribers (in million) 0.854 1.56 0.805 3.05

Fixed telephone subscribers (in millions) 10.7 16.6 17.3 40.0

Internet service subscribers(in millions) 0.129 0.62 2.661 3.69

IV Infrastructure Development

4.5 Water

Potable water coverage (%) 52.12 81 58.25 98.5

Urban potable water coverage ( within 0.5km) 74.64 95 78.71 100.0

Rural potable water coverage (within 1.5km) 48.85 80 55.21 98.0

Large and medium level developed irrigable land (ha) 32034 100234 42229 785583

4.6 Urban Development & Housing

Employment generated under integrated housingdevelopment (000)

176 25 193 182

Employment created by MSE in million 0.542 0.554 1.148 0.740

Reduction of slum areas (%) 50 45 45 30

Urban coble stone road construction (km) 222.2 105 246 3738

V Social development

5.1 Education


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CHAPTER II

ECONOMIC SECTOR

2.1 Agriculture

During the GTP period, the agriculture sector will continue to be the major source of economic growth and

is expected to grow on average by 8.6 percent per annum. To realize this plan, strategies were designed in

relation to increasing agricultural production and productivity, improving natural resource management and

utilization, building disaster prevention and preparedness capacity, improving agricultural marketing, promoting the participation of the private sector in the agriculture sector and ensuring food security in rural

households. In 2011/12 fiscal year, the agriculture sector value added grew by 4.9 percent and the detailed

performance of the sector is shown below.

2.1.1 Crop Productivity and Production

C rop Production: Increasing crop production is crucial for attaining food security, providing inputs for theindustrial sector and boosting export earnings. Crop production constitutes a major share in agricultural

production and contributes a significant amount to the national domestic product. Crop production accounted

for 31.5 percent of GDP in 2010/11 and 30.4 percent in 2011/12. Thus, increasing crop production enhances

agricultural output in particular and the gross domestic product in general, and is essential to improve the

income and living conditions of the majority of citizens. Value added of the crop production sub-sector

increased by 10.3 percent in 2010/11, and by 5 percent in 2011/12. This performance of the crop production


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According to the Central Statistical Agency, during the first year of the GTP period (2010/11fiscal year), the

production of these major crops was 19.36 million quintals higher than the production in 2009/2010,

witnessing a growth rate of 9.6 percent. This growth rate is almost double the growth rate registered in2011/12, exceeding by 4.8 percentage points. This shows that growth rate of crop production has slowed

down in 2011/12. A number of determinants could be cited in this regard. First, cultivated area covered by

cereals (teff, maize and sorghum) has declined by about 1.1 percent in 2011/12 compared to the previous

year. In addition, the amount and distribution of rainfall in the Belg Season was below normal in most Belg

harvesting areas such that the production in this season dropped by 2.2 million quintal compared to the

previous year. These two factors are expected to have contributed to the slowdown in the growth rate of

agricultural production during 2011/12. However, the key factor for the slowdown concerns the inability ofeffectively implementing the scaling up strategy of best agricultural technology and farming practices

adopted by the best performing farmers in the country.

Of the total production in 2011/12, 97 percent (225 million quintal) was produced by smallholder farmers

and the rest 3 percent (7 million quintal) was produced by commercial farms. This clearly shows the

significance of smallholder farmers in crop production. This in turn justifies the policy focus on enhancing

the productivity of smallholder farmers during the Growth and Transformation Plan. On the other hand,

during the fiscal year under consideration, from the total area covered by major food crops, cereals constitute

77.8 percent, pulses constitute 14 percent and oil seeds take the rest 8.2 percent. This indicates a slight

reduction in the area covered by cereals and a slight increase in the area covered by pulses and oil seeds

compared to the previous fiscal year, which further indicate a slight shift of farmers to pulses and oilseeds.

By and large, the performance achieved over the first two years of the GTP period in terms of increasing

production of major crops is encouraging so far and indicates that the 267 million quintal production target


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Table 17. Productivity of selected crops in 2011/12 fiscal year

Crop type Productivit y in 2010 / 11

(Quintal per hecta re)

Productivity in 2011 / 12

( Quintal per h ecta re)Smallholder

farmers (Meher

Smallholder

Farmers (Belg )

commercial

farms

Average Smallholder

farmers (Meher)

Smallholder

farmers (Belg)

Commercial

farm Average

MajorCrops

17.2 7.67 20.62 16.49 18.08 5.82 16.65 16.99

Cereals 18.32 8.64 33.62 12.42 19.61 6.51 26.69 18.64Teff 12.6 5.55 14.48 12.42 12.80 4.18 14.28 12.58Barely 16.27 6.94 24.75 15.03 16.72 5.77 24.43 15.24Wheat 18.38 9.85 33.03 18.41 20.28 8.91 26.19 20.07Maize 25.39 9.50 48.05 22.5 29.53 7.15 31.48 25.11Sorghum 20.85 7.0 24.06 20.5 20.53 2.99 23.52 20.03Pulses 14.38 4.3 16.29 13.05 14.32 3.87 15.92 12.91Horse

beans

15.19 4.7 17.50 15.10 15.62 1.90 17.29 15.47

Field Peas 12.60 6.61 23.70 12.39 12.36 5.28 15.02 11.88HaricotBeans

14.33 4.55 17.14 10.18 11.69 3.85 17.51 8.73

Chick-peas 15.49 2.39 15.97 15.12 17.30 9.90 15.76 17.06Oil Seeds 8.18 0.55 11.66 8.83 8.29 - 7.96 8.10

Neug 5.8 - 6.5 5.85 6.02 - 6.93 -Linseed 8.8 - 17.88 8.83 9.67 - 15.83 9.60Groundnuts 14.43 - 17.20 14.47 16.05 - 15.88 15.05sunflower 9.23 - 17.99 9.34 10.85 - 17.99 12.16Sesame 8.52 0.61 11.67 9.45 7.25 - 7.67 7.30

Source: computed from the Central Statistical Agency Annual production estimates, 2012

During the meher season of 2011/12, the average productivity of these major food crops produced by

smallholders reached 18.08 quintals per hectare. Some of the crops which have registered encouraging

productivity during the meher season include maize (29.5 quintals per hectare), wheat (20.3 quintals per

hectare) and Sorghum (20.53 quintals per hectare). The sustained natural resource development and


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utilize these technologies. It was also planned to neutralize 14090 hectare of acidic and fertile land by lime

though it was possible to neutralize only 1512.1 hectare of land in the fiscal year. The performance shows a

slight increase compared to the previous year but it indicates that efforts are required to accomplish thetarget of neutralizing 37850 hectare of land by the end of the Growth and Transformation Plan. On the other

hand, in 2011/12 fiscal year, 202 thousand hectare of fertile Koticha soil was developed, witnessing 84.2

percent performance. The performance is slightly higher than the previous year despite the fact that it

demands a due effort to develop the 3000 thousand hectare of land by the end of the plan period.

In relation to agriculture input supply, it was planned to supply 2375 thousand quintals of improved seed in

2011/12 fiscal year. However, only 1033 thousand quintals of improved seed were supplied, indicating 43.5 percent accomplishment. Similarly, it was also planned to supply 1087 thousand tone chemical fertilizer

(UREA and DAP), in the same period. However, 1170.5 thousand ton of chemical fertilizer was supplied

during the year under review, which is 7.7 percent higher than the target. In addition to these chemical

fertilizers, farmers have also been using natural fertilizers. The supply of improved seed and chemical

fertilizers has shown an increase of 0.45 percent and 40 percent, respectively, compared to the supply in the

previous fiscal year. The supply of improved seed, however, still remains short of covering even half of the

demand for the 2011/12 fiscal year. This tends to have an adverse impact on achieving the productivity

target of major food crops. The performance in terms of supplying chemical fertilizers is however

encouraging and indicates the possibility of achieving the target of supplying 1665 thousand metric tons of

chemical fertilizers by the end of the Growth and Transformation Plan. Thus it is planned to sustain the

increased supply of fertilizer while at the same time strengthening the effective application of fertilizer in

farming. On the other hand, the performance of improved seed supply indicates that efforts need to be

redoubled in order to achieve the 3.6 million quintal improved seed target by the end of the Growth and

Transformation Plan.


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relation to improving livestock productivity and production. The performance of producing liquid nitrogen

and supplying improved animal feeding seed, however, indicates that additional efforts are required to

achieve the stated targets by the end of the plan period.

On the whole, the livestock sector having vast potential in terms of food security, accelerating agro-

the aforementioned areas is not significant and as expected. To reap the potential of this subsector, it needs

firm and meaningful intervention that can bring a fundamental change so that the contribution of this sector

will continue to be significant at national level.

Agricultural extension service : The encouraging crop productivity and production gained in 2011/12 can

partly be explained by the favorable coverage and distribution of rainfall during the main season as well as

by the expansion of agricultural extension service. In 2011/12, the total number of smallholder farmers,

pastoralists and semi-pastoralists who have been benefiting from agricultural extension service has reached

to 10.5 million. Of the total beneficiaries 30 percent are women while 10 percent are youth. In comparison to

the previous fiscal year, the number of agriculture extension service beneficiaries has risen by 16 percent in

2011/12. A disaggregation of the data show that about 9964 thousand of the beneficiaries of the extension

services are smallholder farmers, while 333 thousand are pastoralists and 183 thousand are semi-pastoralists.

also established to strengthen the structure of government institutions in the agriculture sector. The

remarkable achievement in terms of expanding the agricultural extension service has to be complemented by

improvements in the quality and effectiveness of the extension service in order to register a marked rise in

agricultural productivity over the remaining plan periods.


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expected to have a significant impact on increasing agricultural productivity and ensuring food security in

the country. Going forward, the emphasis should be on sustaining the conservation works, and adequately

linking them with sustainable agricultural development of irrigation, forestry development, and livestockdevelopment.

Implementing land administration system at Woreda level and certifying farmers for first and second level

land ownership titles are the major targets related to sustainable land use planning and management

program. Accordingly, it was planned to implement land administration system in 77 Woredas in the fiscal

year. At the end, however, the system was only implemented in 10 Woredas that increased the number of

Woredas which have implemented the land administration system to 60. On top of this, it was planned togive first and second level land ownership certificates for 1.44 million households and 1.69 households,

respectively. However, first level land ownership certificates and second level land ownership certificate

was given for 0.93 million households and 31 thousand households, respectively. On the whole, the

performance achieved was very low in relation to sustainable land use planning and management for this

fiscal year.

2.1.3 Food Security and Disaster Prevention and Prepa redness

In order to provide early response to emergency needs and improve disaster mitigation, it was planned to

increase the disaster prevention and preparedness contingency budget from Birr 118.23 million in 2010/11 to

Birr 150 million in 2011/12; and the budget has reached to Birr 121.4 million, which is 80.6 percent of the

target. On the other hand, to provide early warning and emergency response based on disaster prevention

profile, it was planned to prepare disaster prevention profile for 250 Woredas in the fiscal year but the

profile was prepared for 171 Woredas which shows 68.4 percent performance. The low performance was


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2.1.4 Private Sector Participation

In the fiscal year 2011/12, massive efforts have been put to boost the export of flowers, vegetables, fruitsand herbs through identifying and cultivating suitable land. Hence, it was planned to cover 2010 hectare,

5456 hectare, 5237 hectare and 938 hectare of land with flower, vegetables, fruits and herbs respectively,

and accordingly 72 percent, 18.5 percent, 192 percent and 3.6 percent performances have been achieved.

The total production performance also shows that 2102 million cut flower (54.6 percent), 110.7 thousand

tone vegetables (54.3 percent), 12.9 thousand ton fruits(9.2 percent) and 0.5 thousand ton herbs(10.6

percent) have been produced in 2011/12 fiscal year. Delay in the participation of investors and capacity

limitations to develop all the investment land transferred to investors are some of the major factors whichhave resulted in low performance in this regard. In addition, in an effort to increase production through

cultivating suitable land, the land covered by root crops has reached 480 thousand hectare while the land

covered by stimulant crops, industrial and spice crops has also reached 210.5 thousand hectares, 80.2

thousand hectare and 147 thousand hectare, respectively. Enhancing the participation of private investors as

well as monitoring their fast and full engagement is quite essential to achieve the targets set with regard to

private sector participation by the end of the Growth and Transformation Plan.

In conclusion, the performances achieved in the agriculture sector particularly in relation to natural resourceconservation and utilization such as water and soil conservation activities, infrastructure development andafforestation programs are very encouraging which demonstrate the change in the mindset of farmerstowards development. The drive should vigorously continue to enhance agricultural productivity and production. However, the productivity of major food crops achieved in the two consecutive fiscal years(2010/11 and 2011/12) falls short of the targets set for each fiscal year. As a result, more rapid and effectiveexecution of the scaling up strategy should be a priority for the rest of the Growth and Transformation Plan periods. More concerted efforts are needed to enhance the agricultural extension service and coordinate the


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fiscal year 2011/12 the revised micro and small scale enterprises development program was more effectively

implemented. Accordingly, several activities were performed to support the establishment of new micro and

small scale enterprises, strengthen the existing ones and enable them transform into medium scale industries.In 2011/12 to alleviate the financial constraints of the enterprises, over 1 billion Birr was provided in credit

to various micro and small enterprises throughout the country. This has increased the total amount of credit

provided to the enterprises over the last two years of 2010/11 and 2011/12 to 2 billion Birr. In addition, to

increase the efficiency and productivity of Micro and Small Scale Enterprise training was provided to

931,907operators on entrepreneurship, business management and technical skills; and training of trainers

was also given to 15,106 members. To reduce the problem of working place of the enterprises a total of 5000

hectares of land, 1,757 shades and 46 blocks were distributed to micro and small enterprises in all cities ofthe country. The comprehensive support provided to micro and small scale enterprises has helped the

enterprises to create temporary and permanent employment opportunities for about 1.1 million citizens of

which 40% are women. Given the 542 thousand jobs created in the fiscal year of 2010/11, a total of over 1.6

million temporary and permanent employment opportunities were created in the first two years of the GTP

period. As a result, it was made possible to accomplish 56 percent of the 3 million employment opportunity

creation that is targeted to be achieved at the end of the GTP period (2014/15).This has helped to reduce

urban unemployment from 18 percent in 2010/11 to 17.5 percent in

domestic saving of the country. In general, the implementation of the micro and small scale enterprises over

the past two years demonstrates the importance of the sector in terms of job creation and entrepreneurship

development.

In general, even though there are some encouraging achievements regarding micro and small-Scale

enterprises development, the high level of poverty and unemployment in urban areas as well as the low level

of productivity and competiveness of the enterprises still remain to be huge challenges. In the fiscal year


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Agro processing:

Documents

GTP report 2012 English